Proposed credit card legislation could help the card holders

by Shannan

Changes being proposed by new legislation could force credit card companies to play fair with their customers. Though the credit card companies vehemently contend their practices are fair and necessary, their customers and, apparently, lawmakers disagree. Some of the more controversial practices of the credit card companies are under fire. Interest rate hikes, customer notification of changes, and billing cycles are being targeted by proposed legislation and may have to be adjusted if the changes are successfully passed.

Currently, if a credit card customer’s credit score is lowered, the company has a right to increase their interest rate. This is known as universal default. The cause of the lowered credit score doesn’t matter. So if a person is late on a mortgage payment and their credit score goes down, the interest rates on the individual’s credit cards are increased. Not only will your interest rate increase, but the increased rate is retroactively applied to the entire balance on the credit card. So purchases you made six months ago will now be subject to the higher interest rate charges.

Credit card customers are all too familiar with the notice of term change mailings the credit card companies send out. How many times have you received a perforated notice informing you of new credit card term changes? By the time you receive the notice, the changes are practically already in effect. The mailing you receive is covered in fine print that would require some time to review in order to even understand how the new terms differ from the old. Once you are notified, you don’t have much time to decide how you want to handle the changes.

The billing notices are another point of contention. Since your payments are due every month, it is important to have sufficient time to budget for them. Credit card payment amounts can vary every month. New purchases, added finance charges, increased interest rates, and of course new credit card terms can all have an impact on the minimum payment due. The current billing process provides only about two weeks notice to the customer. If the customer isn’t able to pay timely based on the two weeks billing notice, the credit cards interest rate is subject to increase and the account can be charged fees.

Law changes affecting current credit card practices could provide relief. A ban on retroactive interest assessment could help alleviate unmanageable debt. Limiting what the credit card company can assess the interest on will benefit credit card holders. Term change notices are usually sent extremely close to the date the new terms will go into affect. Proposed changes would increase the notification time to one month. The extra time would give the card holders time to read the terms and make decisions. Billing notices could be mandated to be sent at least 25 days in advance. The additional time could help prevent unwanted interest and fees.